TaxTMI 
TaxTMI 
2022 (8) TMI 1167
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....ssment order passed under section 143[3] of the Act dated 28/12/2019 and direct the assessing officer to modify the original assessment passed by the learned assessing officer, on the facts and circumstance of the case 3. The learned Principal Commissioner of Income tax is not justified in passing an order under section 263 of the Act, as the order passed under section 143[3] of the Act, was pursuant to proper enquiry by the learned assessing officer on the facts and circumstances of the case. 4. The learned Principal Commissioner of Income tax has passed an unsustainable order which is based purely on assumptions and presumptions. The order is arbitrary and full of surmises, without considering the relevant material and considering irrelevant materials. Consequently, the order passed is a perverse order on the facts and circumstance of the case. 5. The learned Principal Commissioner of Income tax has grossly erred in revising the order passed by the learned Assessing officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the learned POT is ultra vi....
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..... The AO noticed that the assessee in the return of income filed has declared additional income of Rs.3 crores under the head 'income from business' and had paid taxes on the same. The AO upon verification of various documents submitted and explanation offered by the assessee, accepted the returned income and passed the order u/s. 143(3) of the Act. 3. The PCIT noticed the fact that the assessee has admitted Rs.3 crores as business income in the hands of the assessee during the search proceedings and no explanation as regards the source and nature of receipts was submitted. He was of the view that income of the assessee should have been assessed as unexplained cash credit, rather than business income and added back as income u/s. 68 taxed at special rate u/s. 115BBE of the Act. He observed that the AO had not made any enquiry or verification on this issue and to that extent the order of the AO was erroneous and prejudicial to the interests of the revenue. He therefore issued a show cause notice to the assessee in this regard and after considering the submissions of the assessee, he concluded as follows:- "7. I have considered the assessee's submissions and have gone thr....
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....s applied his mind, but another superior officer after considering the observations and conclusions arrived at by AO has accorded the approval. Consequently, two officers having applied their mind and there is no lack of enquiry or inadequate enquiry in concluding the assessment proceedings passed u/s. 143[3] of the Act and thus, the very assumption of jurisdiction u/s. 263 of the Act fails and consequently the impugned order of revision passed under section 263 of the Act deserves to be quashed on this score itself. 7. The ld. AR drew our attention to the statement recorded from the Managing Partner of the assessee, where he has admitted the impugned amount as income of the assessee towards unaccounted receipts out of real estate business. He also submitted that in the computation of income (at page 12 of PB), the assessee has offered the impugned amount as business income. The assessee does not have any other income, other than business and has rightly offered the same under the head 'business'. Therefore, there is no error in the order of the AO accepting the additional income offered as sourced from business of the asse. 8. The ld. DR submitted that the income offered is ....
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....the revenue, if, in the opinion of the Principal 95[Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." 10. Thus, from close scrutiny of the provisions of section 263, it is evident that twin conditions are required to be satisfied for exercise of revisional jurisdiction under section 263 of the Act i.e., firstly, the order of the Assessing Officer is erroneous; and secondly, it is prejudicial to the interests of the revenue on account of error in the order of assessment. The Bombay High Court in the case of Gabriel India Ltd. (1993) 203 ITR 108 has explained as to when an order can be termed as erroneous ....
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....e of the amount declared during the search proceedings is anything other than the income from business of the assessee. The AO has given a clear finding with respect to additional income offered by the assessee as business income. The PCIT in his order has stated that further enquiry would have revealed that the additional income is from an undisclosed source and would have resulted in unexplained income to be taxed u/s.115BBE of the Act. This view of the ld. PCIT, in our opinion, is not the right reason for exercising revisionary powers u/s. 263 of Act, as the error envisaged by Section 263 of the Act is not one that depends on possibility as a guess work, but it should be actually an error either of fact or of law. 12. With regard to the argument that the assessee's case requires to be considered in the light of the explanation (2) to Section 263 of the Act, we notice that the Hon'ble Gujarat High Court in the case of Shreeji Prints (P) Ltd. (130 taxmann.com 293 - Guj) while considering the explanation of Section 263 of the Act, has held that : - "4 Being aggrieved by the order passed by the PCIT under section 263 of the Act, 1961, the assessee went before the Tribuna....
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....d calling for the all information in respect of the loan taken along with details evidences in support thereof and the same were also duly replied by the assessee and on receipt of all the details of evidences, the unsecured loans received by the assessee were accepted by the Assessing Officer and the assessment was finalised u/s.143(3) of the Act on 15-3-2016. We also note that there was audit objection in the case of the assessee. The language of audit objection and show-cause notice under section 263 is same meaning thereby that the show cause notice u/s.263 has been issued by the PCIT Without going through assessment records and without exercising his own application of his mind. The assessee has not only filed complete details of Income-tax Return, audited balance sheet, profit and loss account and bank statement. The assessee further explained that both the these unsecured loans stands fully repaid as on the date and there is no capital creation by the assessee on this count. In view of these facts and circumstances, we are of the considered opinion that the order of the Assessing Officer is not erroneous nor it is prejudicial to the interest of revenue. It was also brought t....
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....the order of the Assessing Officer is erroneous prejudicial to the interest of Revenue. The CIT himself has to undertake some enquiry to establish that the assessment order is erroneous and prejudicial to the interest of Revenue. The ld. Counsel relied on the decision of M/s. Amira Pure Foods Pvt. Ltd., v. PCIT in ITA No.3205/Del/2017 and Ahmedabad Tribunal in the case of Torrent Pharmaceuticals Ltd. v. DCIT [2018] 97 taxmann.com 671 (Ahd. - Trib.). it is clear from the enquiries made by the Assessing Officer and submissions made by the assessee that the Assessing Officer has taken the plausible view which is valid in the eyes of law. The Assessing Officer was satisfied consequent to making enquiry and after examining the evidences produced by the assessee, he accepted the assessee's claim of loan similar view were also expressed by the Hon'ble Delhi High Court in the case of CIT v. Vodafone Essar South Ltd. [2013] 212 taxman 0184. We observe the Pr.CIT has drawn support from newly inserted Explanation 2 below section 263(1) of the Act introduced by Finance Act, 2015 w.e.f. 1-6-2015 for his action. The Explanation 2 inter alia provides that the order passed without making i....
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....sessee that the Revisional Commissioner is expected show that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for directing a fuller inquiry to merely find out if the earlier view taken is erroneous particularly when a view was already taken after inquiry. If such course of action as interpreted by the Revisional Commissioner in the light of the Explanation 2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. This would inevitably mean that every order of the lower authority would thus become susceptible to section 263 of the Act and, in turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and ....
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.... to the interest of the Revenue." 13. The SLP against the above order of the Hon'ble High Court was dismissed by the Hon'ble Supreme Court, thereby the issue, that the explanation (2) to Section 263 of the Act could be invoked only in a very gross case of inadequacy in enquiring or where the mandatory enquiries are not conducted, has reached finality. 14. Further it is noticed that in the statement recorded u/s.132(4) the assessee has made a clear declaration that the source for the additional income offered is from the business. The relevant extract is reproduced below:- "19. Do you have anything else to say? Ans. Sir, as I have stated in earlier answers to the questions that I have received sales proceeds and advances from customers in cash which are not accounted in the books of account. The cash received from those transactions are paid for the expenses which arises for the business exigencies. In order to rectify the omission and commission that occurred in my accounts, I hereby offering an additional income of Rs. 7,00,00,000/- (Rs. Seven Crore) above to the regular income in the hands of my business entities. The details are as follow:- Sl. No. ....